The shares climbed as much as 6.5 percent in Madrid, the
biggest gain since Sept. 11. They rose 6.1 percent to 2.15 euros
at the close, extending an increase this year to 14 percent and
valuing the company at 8.6 billion euros ($11.7 billion). The
Sabadell-based bank said today that net income was 61.7 million
euros compared with a loss of 8.73 million euros in the year-ago
period. That beat the average 57.5 million-euro estimate in a
Bloomberg survey of five analysts.

Spanish banks’ share prices have jumped this year as
investors anticipated that an economy that’s growing after two
recessions will generate more revenue and help stem the flow of
loan defaults. Sabadell said today it will seek to triple its
return on equity, a measure of profitability, to more than 10
percent over the medium term, saying earnings reached an
“inflection point” in 2013.

“There was good margin progression in the quarter, which
is likely to be taken positively by the market,” Daragh Quinn,
an analyst at Nomura International in Madrid, said in an e-mailed report to clients after the earnings were published.

Net interest income, or the revenue from interest earned on
assets minus payments to depositors, increased to 497.7 million
euros in the fourth quarter from 451.2 million euros in the
third quarter and 414.6 million euros in the previous three
months. Sabadell said its fee income climbed 20 percent from a
year earlier and trading revenue jumped 38 percent.

Bad Loans

Chief Executive Officer Jaime Guardiola underlined the
bank’s commitment to a new medium-term business plan in which it
will strive for efficiency and profitability gains. The firm
will shed about 1,000 employees within three years, bringing its
workforce below 17,000, Guardiola said at a news conference in
Barcelona today.

Sabadell’s bad loans as a proportion of total lending rose
to 13.6 percent at the end of the fourth quarter from 12.6
percent in September, it said. Provisioning charges to cover
impaired assets rose to 429.4 million euros from 261 million
euros in the third quarter, Sabadell said.